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The Argentine government announced on 25 June that it was imposing controls on foreign capital inflows in a move aimed at ensuring stability in the exchange rate. The measure is aimed especially at short-term speculative capital inflows, or hot money.

Under the measures, which are expected to come into effect this week, foreign funds not linked to trade will 'be registered on their entry and their exit will be allowed only after 180 days,' economy minister Roberto Lavagna said. Withdrawals before that time will be taxed. This way the government hopes to prevent the inflows of speculative capital, mostly in the form of US dollars, which have contributed to a sharp rise in the value of the peso in recent months. The Argentine peso has strengthened 21% against the US dollar so far this year, having fallen almost 70% in 2002. At the same time, the amount of hot money entering the country has risen some 70% year-on-year, to over US$900m in the first six months of 2003.

The move to impose capital controls represents the first major economic play to have been made by newly elected President Néstor Kirchner, and it is in keeping with his avowed policy to increase the government's role in handling the economy.

The decision by the US Federal Reserve Bank to cut interest rates by 25 basis points meant that pressure on the peso was only going to increase, and with the central bank seemingly unable to control the rise in the currency's value, Kirchner evidently saw that responsibility to act lay with the government. A source in the economy ministry said the decision was 'inevitable due to the extremely high level of liquidity in the global financial markets.'

US Treasury Secretary John Snow expressed his disapproval at the measures, saying, 'In general we are pretty firmly of the view that capital controls are a mistake; they interfere with the market [and] discourage people from the willingness to make their capital available.' The IMF said that controls were sometimes appropriate.

PRIVATE STUDY COMPARES SCENE WITH PRE-GIULIANI NYC

Violent crime in Chile has increased sharply, but the rate appears to have been stabilised in the past few months. Both conclusions emerged from statements by top officials last week, which showed the rates of reported crimes in the first quarter of this year sharply up on the same period of 2002 but virtually unchanged from the last quarter of last year, and a private study which suggested that higher spending on security wasn't working.

'Like New York in 1994.' It was the publication of a study by the Instituto Libertad y Desarrollo (ILD), a private think-tank, that brought the issue of personal security back to the fore last week. According to its data, 'major' crimes had increased by 83.4% over the past eight years.

Indeed, armed robbery (the crime which most contributes to the public perception of insecurity) increased by 232.6% in 1997-2002. In the metropolitan region (Santiago and its environs), the report says, holdup rates 'have reached alarming levels, similar to those faced by New York in 1994, just before it started implementing the Zero Tolerance plan which reduced crime rates by 40%.'

The main point made by ILD is that in Chile a parallel increase in anti-crime spending had been ineffectual. In the period surveyed, says ILD, public-sector spending for this purpose increased by 80%, and private-sector spending by 100%. All told, the report says, US$2.57bn was spent on security in Chile last year.

The undersecretary of the interior, Jorge Correa Sutil, challenged the conclusions of the study, though his criticism was chiefly aimed at the methodology for calculating overall spending on anti-crime purposes.

The latest figures. Two days later, though, Correa was sitting beside his boss, interior minister José Miguel Insulza, at an unusually high-level presentation of crime statistics that portrayed a situation about as bad as that outlined by the ILD.

In the first quarter of this year, they reported, the number of holdups countrywide was 36.2% higher than in the same period of 2002; in the metropolitan region, 25% higher. For all 'major' crimes the countrywide rate of increase was 11.02%.

The one comfort drawn by Correa from the statistics was that there appeared to be a 'trend towards control of reported crimes.' This, he said, emerges from the fact that the number of 'major' crimes reported in January-March was actually 0.76% lower than in October-December.

MANY PREDICT HARSH MILITARY RESPONSE IN CHAPARE

The feud between President Gonzalo Sánchez de Lozada and his arch-rival, Evo Morales, has escalated again after the latter was accused of directing a spate of violence in the coca-growing Chapare area, and he in turn announced that he was suing his accuser, interior minister Yerko Kukoc, for defamation and libel.

Clashes in the central Chapare region, between coca growers and the joint military-police eradication squads, had been increasing steadily over recent weeks. In mid-June, a powerful nail bomb killed two soldiers and injured six other members of a team moving in on coca plantations of the Sindicato San José. Days later another explosive device injured two policemen on an eradication team in Ivirgarzama.

Responses. Interior minister Kukoc, even before he had the full facts of the first incident, publicly blamed Morales. 'The Bolivian people,' he said, 'point at Evo Morales Aima and accuse him. These acts of violence are ordered by him.'

This came just as Morales was being re-elected (for the sixth time) president of the coordinating committee of the Federaciones Campesinas del Chapare -the umbrella association of cocalero unions.

It is worth noting that Morales's first reaction to the first bombing was to claim that he had 'lost control' of his grassroots followers. Then he suddenly changed his tune, suggesting that this was the work of government agents provocateurs seeking to justify a major military intervention in the Chapare.

In any case, after his re-election Morales persuaded his followers to call a 'truce', promising them that they would embark upon a drive to gain power through the ballot box, starting with next year's municipal elections.

Once Morales had filed his suit, the government softened its attitude. In the wake of the second bombing, presidential spokesman Mauricio Antezana invited Morales to contribute to the 'pacification' of the Chapare by returning to the negotiating table.

'Inasmuch as it may depend on Evo Morales,' he said, 'we ask him to halt this climate of confrontation, starting with the study of the legal market for coca.' This was an allusion to the government's offer to commission an independent study to determine the actual demand for 'legal' coca.

Morales, for his part, called on the church to mediate in a dialogue with the government, to prevent a harsh response to the bombings by the eradication forces.

The undercurrents. In La Paz there are those who see a strong military response as inevitable. The influential newsletter Siglo 21 said, 'Even if there had not been a determination to go for a radical solution of the Chapare problem, the [recent] attacks would justify it. Public opinion is now prepared for the government to launch upon Chapare the military action which is being readied.'

The publication also suggested that the government's campaign against Morales was behind the resuscitation, last week, of a three-month-old report claiming that Colombia's ELN guerrillas were establishing 'fronts' within Bolivia.

Behind this story was the arrest in La Paz, on 19 April, of the Colombian national Luis Gerardo Cortés Beltrán (aka Francisco Cortés Aguilar), reputedly a member of the ELN.

On 26 June, Bolivian foreign minister Carlos Saavedra Bruno -in Colombia at the time the story was broadcast there by RCN- dismissed any suggestion of a link between Colombian guerrillas and Bolivian cocaleros.

What seems to be happening is that some, but by no means all, of the members of the Bolivian government believe that affixing a 'terrorist' label on Morales would help gain extra support for action that the US embassy in La Paz has already been urging.

LOCAL MAYOR WANTS AUTONOMY WITHIN CHILE

On 22 July the UN will be hearing a plea for independence by the council of elders of Rapa Nui, better known as Easter Island; a Polynesian possession of Chile's that lies 3,750 kilometres off the South American country's coast, and has a population of 3,200.

The most vocal of the pro-independence elders is Raúl Teao, who claims descent from the island's last king. Their main argument is that the document of cession signed by the Rapa Nui elders in 1888 with Chilean Lieutenant-Commander Policarpo Toro (after he had paid off all those claiming to own the place), had never been ratified by Chile.

Behind the independence drive is the islander's indignation at the 'syphoning' of most of the Ch$140bn (US$198m) the island earns annually from tourism by the Chilean government, which only allocates it a budget of Ch$1bn (US$1.4m). This situation also underlies the efforts of thrice-elected Rapa Nui mayor Petero Edmund Paoa to obtain administrative autonomy for the island.

Finance minister Tobí­as Nóbrega announced last week that he would unveil a new exchange-control system within days. The current régime, hobbled by bureaucracy, is blamed by businesses for keeping the economy in a deep recession. Nóbrega said that he would assert his authority over the Cadivi system, which has been placed under his ministry: previously it had been independent. 

Nóbrega said that the policy for the new system would be set jointly by the government and the central bank. He refused to say more about the likely changes, but it seems that the government will move towards a two-tier system. The current rate of Bs1,600 to the dollar will hold for interest payments, remittances and imports while there will be a freer rate for other transactions. The current (thin) blackmarket rate is anything from Bs2,200 to Bs2,700 to the dollar. 

Nóbrega claimed that disbursements under Cadivi had increased dramatically in the past few weeks. He claimed that Cadivi had now authorised US$900m in disbursements and paid out US$500m. A week earlier the figures had been US$700m and US$162m, respectively. He claimed that the system was now approving US$20m a day. 

Just before Nóbrega's announcement, central bank director Domingo Maza, who had consistently been in favour of exchange controls, stated that he was concerned about the effect of the controls on the money supply. As exchange controls prevent banks from using bolí­vares to buy dollars, the central bank has been buying bolí­vares off them with certificates of deposit. 

The central bank seems to have issued around Bs5.5tn (US$3.4bn) worth of CDs to stop this cash driving inflation even higher. Most of this paper is issued at interest rates of 20%. So another trillion bolí­vares will be added to the money supply. The bank says that it will get the government to meet this cost. 

Maza said that the bank realised that there were costs to the policy but there was no alternative.

GUTIERREZ ENDORSES KEY ITEMS OF CONAIE 'MANDATE' 

President Lucio Gutiérrez has just about persuaded his indigenous allies to stay aboard the ruling coalition, but now finds himself having struck a peculiar alliance with the right in congress, largely motivated by his reaction to recent statements by a left-of-centre former President.

Last week was expected by many in Ecuador to culminate in a make-or-break challenge for the ruling alliance. The umbrella indigenous confederation Conaie -sponsor of the Pachakutik movement, junior partner in the ruling coalition- had given its leader Leonidas Iza a 'mandate' which he was expected to get endorsed by President Gutiérrez. 

Rejection would mean that Conaie would follow its member-organisation Ecuarunari into opposition. 

Agreeing with Conaie. Quite unexpectedly, Gutiérrez decided to sign with Iza a document committing the government to: 

* Eschew any projects entailing the privatisation of 'strategic' state enterprises. 
* Review several oil contracts with a view to their amendment or annulment. 
* The promotion of public forums to discuss future oil and energy policies. 
* Refrain from increasing the price of cooking gas. 

Duel with Borja. As the indigenous front was calmed down, Gutiérrez decided to open hostilities on another, by overreacting to statements made by former President Rodrigo Borja, of Izquierda Democrática (ID) in a television interview. 

Like virtually every Ecuadorean politician of some note, Borja was questioned on the recent set of rumours about coup plots. 'I don't believe,' he said, 'that a coup d'etat would be possible in Latin America. I think that is a period we have left behind -but there evidently are mechanisms to replace a President by constitutional means, and that is not a coup d'etat.' 

Gutiérrez blew a fuse. He publicly ordered the chief prosecutor to initiate investigations 'to identify and punish those who, by unleashing rumours, conspire against the peace and tranquillity of the citizenry and the constitution of the Republic.' 

Almost in the same breath he lashed out against 'a vain personage of national politics [who once directed the state and has now] dangerously incited sedition.' 

He then sought a resolution from congress against Borja. This resulted in a strange alliance between Gutiérrez's own Partido Sociedad Patriótica (PSP), the conservative Partido Social Cristiano (PSC) and the Partido Roldosista Ecuatoriano (PRE) -the latter frequently described as rightwing populist. 

This coalition promptly approved a resolution condemning Borja's statements as 'conspiratorial and coupmongering'. The PSP's ally in government, the indigenous Pachakutik, split on the vote. 

Though the alliance has been portrayed as ad-hoc, the parties have already found common ground on a string of other issues, which may prolong its existence. 

'Calamity' foreseen. Borja's party, ID, suspects that the real conspiracy afoot is a deal on cleaning up the military records of those who sided with Gutiérrez in the coup of 2000. 

Borja insists that he defends the constitution, 'including the article which empowers congress to impeach the President.' 'This good man [Gutiérrez] needs reminding that he is the conspirator, who on the midnight of a certain day formed a triumvirate to breach the constitution.' 

Borja fears a 'calamity' developing as a result of infighting in the government. If this goes on, he says, 'the whole country will be demanding the revocation of [Gutiérrez's] mandate.'

Venezuela's umbrella private-sector organisation, Fedecámaras (one of the pillars of the recent strike-cum-lockout which failed to unseat President Hugo Chávez ), predicts that 30% of local businesses could be forced to shut down as a result of the economic crisis and the aggravating effect of the exchange-control régime (see above).

Finance minister Mauricio Pozo flew to Washington on 29 June to try to unblock the disbursement of US$42m the country had expected under the IMF agreement signed in February (WR-03-06). This is the second tranche of the US$205m programme. The Fund announced last week that it had put back a review which had been due on 24 June: now it will take place sometime in July. 

Pozo and his team, which includes the president of the central bank, will provide the IMF with details on the budget. It was the lack of detail on how the country was meeting the fiscal deficit targets that prompted the IMF to suspend the review. 

Finance ministry officials said that the increase in teachers' wages, which was agreed in order to settle the recent strike (WR-03-23), would lead to US$20m in extra spending. 

The teachers' pay rise is to be phased in from October. The week-long (9-17 June) strike in the oil industry had also had an effect on the revenue side, officials said. 

Besides the effect of the teachers' settlement and the oil strike, the IMF is also concerned about the government's plans to end duties on raw materials and about opposition in congress to the proposed reforms to the tax system and labour laws. 

The IMF cash is seen by analysts as essential for Ecuador to keep servicing its debt load. The central bank is confident that the IMF will disburse the US$42m before the end of August. It did admit that the delay would have some cashflow consequences. 

The country has asked the IMF to revise the timetable for monitoring and disbursements on several occasions.

OPPOSITION TROUNCES PNP IN LOCAL ELECTIONS 

Even cynical political commentators who warn against reading too much into midterm or local elections are saying that a turning-point may have been reached in Jamaica. In the local contests held on 19 June, the opposition Jamaica Labour Party (JLP) won 11 of the 12 parish councils plus the Kingston & St Andrew Corporation (KSAC). 

The most eloquent direct point of comparison is provided by the previous round of local elections, in September 1998, when the ruling People's National Party (PNP) took all 12 councils and the KSAC. 

It is only the second time since Jamaica's independence in 1962 that a governing party has lost the local government elections. 

The PNP has been in power for 14 years. It was most recently returned for a fourth consecutive term only eight months ago. Technically, it does not have to worry about a general election until 2007. 

However, what commentators are saying is ominous: that the most recent verdict of the electorate was not so much an endorsement of the JLP as a condemnation of the PNP. 

Most irksome for most Jamaicans was the J$14.5bn tax drive sprung upon them recently by finance minister Omar Davies. 

The JLP gained much political capital from Davies's admission earlier this year that the government had erred in its handling of the economy, and that this had led to a widening of the fiscal deficit. This prompted rating agencies to downgrade their outlooks on Jamaican debt. The JLP accused the PNP of misleading the public by campaigning on a platform of sound economic management in the general elections. 

JLP strategists are already talking about launching a campaign to force the government into calling a general election within 18 to 24 months. JLP general secretary Ken Baugh is predicting that the economy will seize up within the next few months, and that this will generate social unrest that will force the government's hand. 'Events,' he says, 'are going to determine what is going to happen.' 

His counterpart, PNP chairman Robert Pickering, says that this gamble on an early election is a 'recipe for pandemonium'.

'SLOW MARCH' TACTICS SWAY PRO-GOVERNMENT BLOC 

Costa Rican students are back at school this week, after a month-long teachers' strike that claimed the job of the education minister and severely rattled the Pacheco administration. 

For a while last week it looked as if the teachers were going to lose. Their only remaining demand was the preservation of their old pension scheme, threatened by a legal ruling. The government was threatening sanctions against the recalcitrant strikers. 

It looked likely that a majority in congress would refuse to legislate the way the teachers wanted. What appears to have tilted the balance was the teachers' adoption of a new tactic: the 'slow march' -not an actionable roadblock but an alternative equally capable of bringing traffic to a standstill on main highways. 

After only three days of this, the congressmen of the ruling Partido Unidad Social Cristiana (Pusc) had had enough. They agreed to submit a bill protecting the threatened parts of the teachers' pension scheme. The government also promised to take no action against the strikers. 

The ruling the teachers were resisting would have increased the number of years at work entitling one to a pension from 30 to 33 years. It would also have reduced pensions from 100% of full pay to 63%.

US President George Bush has promised Panama's visiting President Mireya Moscoso that he will do all he can to move towards negotiations on a bilateral free-trade agreement. Bush said he would instruct US Trade Representative Robert Zoellick to 'accommodate' Panama. Zoellick will be charged with choosing a model for the negotiations from the current US-Cafta or the recently-concluded FTAs with Singapore or Chile. 

Moscoso has come under pressure for failing to get Panama included in the US-Cafta trade accords being negotiated with the rest of Central America. Panama is keen to narrow a large trade deficit with the US: at some US$1bn, imports from the US are three times the value of Panama's exports to the US. 

The presidential meeting also touched on the security problems on the Panamanian border with Colombia. The Darién border area between Colombia and Panama, a dense expanse of jungle, has gained notoriety over the years as a sanctuary for Farc guerrillas, labelled a terrorist organisation by the US. Moscoso said that she was cooperating with Colombian counterpart Alvaro Uribe to crack down on incursions into the border area. The two countries recently signed a new pact which aims to foster improved links between the Colombian and Panamanian security forces and to set up a bilateral police working group, which will meet on an annual basis.

The rating agency Moody's has downgraded the rating outlook for the Bahamas from 'positive' to merely 'stable' in light of the ongoing drag on the local economy caused primarily by a sluggish tourism industry. At the time, Moody's also affirmed the government's A3 rating for foreign currency bonds and notes. 

The Bahamas' highly open economy allows the country to benefit from favourable external conditions, says Moody's, but it also introduces vulnerabilities in an adverse global environment. The 11 September 2001 attacks on the US, the continuing threat of terrorism, and geopolitical uncertainties have placed exceptional pressures on the national economy through the tourism sector, says the rating agency. 

While showing some signs of recovery, the tourism industry has yet to return to a healthy growth path, says Moody's. The weak economic activity of recent years has also reversed favourable fiscal trends, shifting the budget into moderate deficits from a nearly balanced position and raising government debt relative to budgetary revenues and GDP. 

Despite these new challenges, the credit fundamentals of the Bahamas remain supportive of the government's A3 foreign currency rating, and the Bahamas' fiscal and external indicators are well positioned compared with the country's peers, says the rating agency. 

Moody's says it expects that the current government will be able to maintain the previous government's track record of prudent economic policies and that the Bahamian economy, and its tourism industry, will maintain its underlying competitiveness.

The government of the Dominican Republic has sent a letter of intent to the IMF underpinning a standby credit arrangement agreed in principle, which would almost certainly pave the way for loans from the World Bank and the IDB. 

The commitments in the letter: 

* Freeze salaries of government workers for the rest of the year. 
* Reduce the fiscal and quasi-fiscal deficits to 1% of the gross domestic product in 2003 and by 2% in 2004. 
* Dissolve the Baninter Group and its properties as soon as possible and pay depositors. 
* Improve supervision of commercial banking. 
* Adjust spending on government projects to a level that does not exceed 5.1% of the GDP for 2003. 
* Work towards the unification of the exchange rate. 
* Work with international financial organisations in order to produce a fiscal reform package for 2004. 

Among the fiscal measures announced by the government are a 2% tax on all imports; a 0.15% tax on all cheques; and a US$10 surcharge for outbound passengers at airports and ports (increasing the cost of the departure card to US$20). 

The central bank had imposed exchange controls in the wake of the continued slump of the Dominican peso, which had lost about half of its value against the US dollar over the course of the last year, with the dollar rate rising from RD$17 in June 2002 to RD$35 now. 

The government said it would work on a thorough fiscal reform package, which it will present to congress next year. 

It also said that, without a deal with the IMF, the public sector deficit would reach 4% of GDP this year, three times the official estimate. 

Only after the announcement in Santo Domingo did the IMF abandon its know-nothing stance, with chief spokesman Thomas Dawson stating, 'A Fund mission recently, just the last day or two, concluded negotiations on a two-year stand-by arrangement and has returned to headquarters and is preparing its report for management and the executive board.'

Economic activity in Costa Rica in the first four months of this year was up 6.4% on the comparable period of 2002. Exports increased by nearly 20%, to US$2bn. Imports grew by 10%, to US$2.6bn. The strong growth was driven by a pick-up in the tourism industry and at the microprocessor company, Intel. 

The government of Nicaragua is pushing ahead with the full privatisation of Enitel, the state telecommunications company. 

BSCH of Spain and BNP Paribas of France are competing to sell the last 40% of the shares of Enitel.

Jamaica's sugar crop this year has been estimated by industry sources at 169,000 tonnes, considerably lower than the target of 185,000t. 

In the six member countries of the Sugar Association of the Caribbean (SAC), activity 'began slowing down' during the month of May.

The candidates favoured by Argentina's newly elected President Néstor Kirchner enjoyed mixed fortunes at provincial elections held in the provinces of Tucumán and Tierra del Fuego on Sunday 29 June. 

In the north of the country all seems to have gone according to plan for the ruling Partido Justicialista (PJ). Exit polls in Tucumán indicate that the PJ candidate José Alperovich will be the new governor, a post he takes over from the Peronist José Miranda. 

In Tierra del Fuego, however, the PJ suffered its first electoral defeat this year when the current governor Carlos Manfredotti was defeated by an opposition alliance headed by the UCR senator Jorge Colazo. Colazo succeeded in overturning a two-point lead held by Manfredotti after the first round, to gain 51.8% of the 52,000 votes cast and win by five-and-a-half percentage points. 

It is unlikely that Kirchner will be either elated by the victory in Tucumán or downcast by the Tierra del Fuego reverse. He did not visit either province in the run-up to Sunday's vote, and as Manfredotti is an erstwhile ally of Carlos Menem, there is a significant silver lining for the President. Kirchner will also have taken heart from the fact that, when acknowledging his victory, Colazo declared: 'Whatever people might say, Kirchner did not lose here today'. 

Either way, there is not long to wait before the president and the PJ face another test of their leadership credentials. There are a further 13 provincial elections scheduled for the remainder of this year, with the next taking place in the Capital Federal on 24 August.

* Fox's friends off the hook. The federal chief prosecutor's office (PGR) has dropped the criminal investigation into allegations that President Vicente Fox's 2000 election campaign was financed through money laundering. The special money-laundering unit told the Instituto Federal Electoral (IFE), which had handed over the evidence to it, that there was no case to answer.  

The Amigos de Fox, who backed the president's election campaign, seem to have got off on a technicality. The PGR said that there was no evidence to suggest that the money that was moved around the accounts was the product of criminal activities. It said that it could only investigate if there was evidence that the money involved was produced by crime.  

The IFE now has two weeks, starting from today, to decide whether to provide more evidence or let the matter drop. The IFE is hinting strongly that it has enough evidence to find the Amigos guilty of breaking its electoral rules on campaign finance.  

* No more advertising. President Vicente Fox finally conceded last week that it was not the executive's role to encourage people to vote in the mid-term congressional elections on 6 July. He accepted that this was properly the role of the Instituto Federal Electoral (IFE).  

Opposition parties had become annoyed with Fox for refusing to abide by the terms of the agreement with the states that all promotional broadcasts should be suspended for the final three weeks of the election campaign.  

The opposition parties had claimed that Fox and the government were using the broadcasts to shore up the crumbling vote for the Partido Acción Nacional (PAN).  

The latest opinion poll, in Milenio, shows that the main opposition party, the Partido Revolucionario Institucional (PRI) is on course to increase its representation in the 500-seat lower chamber. It reckons that the PRI will get 42% of the seats and the PAN 36%. The third main party, the Partido de la Revolución Democrática (PRD), is also on course to increase its representation: it will get 19%, Milenio says. That will mean a virtual doubling of its representation, to around 100 seats.

The supreme court has issued a tight deadline for the legislature to produce a new electoral council, the first prerequisite for a referendum on Chávez 's permanence in power.

The first real step towards a referendum on whether President Hugo Chávez will remain in office - the selection of a new electoral council - is now up against a deadline. The supreme court has given the national assembly until 14 August to fulfil its duty to produce the appointments (so far blocked by the resistance of the smaller opposition parties). Otherwise, the court has said, it will hand over the matter to its constitutional panel, which will make provisional appointments, valid enough to call the referendum and oversee it.

This had always been a possibility, though nobody favoured it. Venezuela's constitution allows the supreme court to remedy the `omissions' of the legislature.
The ruling Movimiento Quinta República (MVR) has begun to wave a counter-argument: that this does not enable the court to `invade' the exclusive powers of the assembly. The chief prosecutor has sided with the court's interpretation, and even in the MVR ranks, cooler heads have been pointing out the obvious: it is the supreme court that decides what is and what isn't constitutional.

Just in case the assembly fails to meet the deadline, the court has initiated consultations, seeking nominations from far and wide - which could suggest that it will not confine itself to selecting the `fifth person' government and opposition have failed to agree upon. The MVR, meanwhile, is pursuing a two-track policy: one track is using the court's ultimatum to try to get the assembly to close the matter itself; the other is to proclaim that any attempt by the court to `usurp' the assembly's powers will be `tantamount to an institutional coup' and could trigger a `mass response'.
President Hugo Chávez , following an already usual pattern in cases of confrontation between the powers of state, is away touring foreign places. If the pattern holds, he should return in conciliatory mood. A hint: Yesterday Vice-President José Vicente Rangel excused himself from opining on the matter, on the grounds that `it is a problem between the legislative and judiciary powers.'

One thing the spat has made clear is that, for all the reservations of the opposition, the supreme court is not a puppet of the Chávez government. For the warring parties, doing nothing and allowing the court to intervene could be a way of enabling things to go forward while having someone beyond themselves to blame if the outcome fails to meet their expectations. Whichever way it turns out, it is highly unlikely that the time will suffice to hold a referendum before the end of this year.